New car insurance ‘Vehicle Risk Rating’ replaces 1-50 groups

A new system for rating car insurance premiums has been introduced. The system is based on a scale of 1-99 and will eventually replace the current 1-50 car insurance rating.

The new system is called ‘Vehicle Risk Rating’ (VRR) and includes five detailed criteria for insurance risks.

Additionally, the new system is dynamic, meaning that auto insurance ratings can change over the life of a vehicle as new information, such as real-world security statistics, emerges. The current group rating system is static and is set when the vehicle is launched.

Thatcham Research developed the new VRR system, which took 18 months to develop and evaluated over 1,300 data points from 25,000 cars and vans.

“New technology is challenging the existing motor insurance model and driving an unprecedented shift in the balance of risk from the driver to the vehicle,” said Jonathan Hewett, CEO of Thatcham Research.

“We have worked closely with insurers using advanced data analytics to create a rating system that provides a more accurate and detailed assessment of vehicle risk.”

According to Hewett, this not only allows for more accurate calculations of auto insurance premiums, but also encourages companies to take insurance into account when designing new cars.

Car Insurance Vehicle Risk Classification Explained

The new Vehicle Risk Rating system is based on five assessments. These ‘provide a holistic view of the risk profile of each vehicle’:

Each rating is scored on a scale of 1 to 99. The aim is to give auto insurers a more detailed insight into individual vehicle risks, allowing drivers to set more accurate and personalised premiums.

• Performance: Speed, Acceleration and the Impact of Modern Powertrains
• Damageability: How design, materials and construction affect repair costs and severity of damage
• Repairability: the ease and cost of repairs – to encourage repair-friendly designs
• Safety: active and passive safety systems, including collision avoidance functions
• Security: Physical and digital security measures, using Thatcham Research’s New Vehicle Security Assessment data

Repairability is particularly important, as repair costs for car insurers have increased by 28 percent in just one year. What’s more, Thatcham Research has found that electric cars are 25 percent more expensive to insure than petrol cars – and take 14 percent longer to repair.

“Repairability is becoming increasingly important,” Hewett said. “Without a sharp focus on sustainable repair at the design stage and at the launch of the vehicle… the industry’s environmental efforts risk being undermined by vehicles that become disposable too early in their use.”

What’s Next for Auto Insurance Reviews?

According to Thatcham Research, the new Vehicle Risk Rating system will be used alongside the old group classification system for the next 18 months.

Cars will be ‘dual rated’, with a weighted overall VRR rating calculated for every new car on sale. VRR will then become the single point of reference for assessing the vehicle’s risk.

The two systems are not directly comparable, warns Thatcham. A car with a Group 20 classification today will not automatically be given a 40 classification under VRR.

Because the system is much broader – with over 1,000 data points spread across the five pillars above, rather than the current system’s fixed 125 vehicle characteristics – more accurate vehicle information is combined with traditional driver-specific aspects such as claims history.

The aim is to create more accurate individual premiums that take into account the progress made by many car manufacturers.

This can include the use of advanced driver assistance systems (ADAS) to avoid collisions, and new security technology to stay ahead of criminal gangs.

“Vehicle design and technology have undergone a huge change,” said Richard Birch, chairman of the Vehicle Risk Rating panel (and underwriting manager at Saga).

“Vehicle Risk Rating, with its enhanced score informed by the five risk assessments, provides a much more accurate assessment than the old group rating system, enabling insurers to rate and underwrite, while providing transparency to manufacturers so they can design and build more insurable vehicles.”

Motoring Research will keep you updated on the rollout of the new Vehicle Risk Rating car insurance system, including feedback from car insurers, motorists and car manufacturers..

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